Gotthelf v. Comm'r of Internal Revenue
| Decision Date | 11 August 1967 |
| Docket Number | Docket Nos. 5921-65,6269-65. |
| Citation | 48 T.C. 690 |
| Parties | SARA NICHOLL GOTTHELF, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENTTHEODORE J. GOTTHELF AND TOBY GOTTHELF, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Seymour Reitknecht, for the petitioner in docket No. 5921-65.
Harvey L. Gardner, for the petitioners in docket No. 6269-65.
Jay Hamelburg, for the respondent.
Held, payments aggregating $7,000 a year (out of a larger total) by a husband to his divorced wife were for the support of their two minor children and were neither includable in her gross income nor deductible by him. An agreement providing for these payments contained a rider which sufficiently ‘fixed’ or specified such payments as child support so as to meet the requirements of Commissioner v. Lester, 366 U.S. 299, and to qualify as child support under sec. 71(b), I.R.C. 1954.
The Commissioner determined the following deficiencies in the income tax of petitioners for the year 1960: Sara Nicholl Gotthelf, $2,092.37; Theodore J. and Toby Gotthelf, $1,632.87.
The sole question for decision is whether $7,000 out of a total of $11,400 paid in 1960 by a divorced husband to his former wife, pursuant to a separation agreement, is deductible as alimony by the husband and includable in the income of the divorced wife under the provisions of section 71(a) and 215 of the 1954 Code, or whether the payment of that $7,000 represents child support under section 71(b), which is neither deductible by the husband nor includable in the income of the wife.1
The pertinent facts have been stipulated, and, as stipulated, are incorporated herein by reference as our findings of fact.
Petitioner Sara Nicholl Gotthelf filed her Federal income tax return for 1960 with the district director of internal revenue, Manhattan District, N.Y. Petitioners Theodore J. Gotthelf and Toby Gotthelf filed their joint Federal income tax return for 1960 with the district director of internal revenue, Brooklyn, N.Y. All petitioners were residents of New York when the petitions herein were filed.
Sara and Theodore were married on July 20, 1951. They had two children, Nicole Patrice Gotthelf, born on July 28, 1955, and Eric Van Gotthelf, born on October 24, 1956. On March 28, 1958, Sara and Theodore entered into a separation agreement. They were divorced on April 3, 1958, and the separation agreement was incorporated in the decree of divorce by reference. The agreement provided in part as follows:
(5) (a) In addition to the provisions heretofore made in Paragraph ‘4’, the husband will hereafter pay to the wife, so long as she shall remain alive and does not remarry, the sum of TWELVE THOUSAND ($12,000.00) DOLLARS annually as and for her support and for the support, care (including, but not by way of limitation, medical care and expenses), maintenance and education of the children of the marriage. Payment of the aforesaid sum shall be made in equal monthly installments of ONE THOUSAND ($1,000.00) DOLLARS each on the 1st day of each month in advance. * * *
(b) In the event that the parties become divorced, and that the wife thereafter remarries, then the amount which the husband shall pay the wife for the purposes stated in 5(a) of this agreement shall be reduced to the sum of SEVEN THOUSAND ($7,000.00) DOLLARS annually, to be paid in equal monthly installments, subject to the further provisions of paragraph 5(c) of this agreement.
(c) When either child reaches the age of twenty-one years, or in the event of the death or marriage of either child before he or she becomes twenty-one years of age, or in the event that either child is no longer living under the care and supervision of the mother (e.g., if either child is in the military forces), then the amount which the husband shall pay the wife shall be reduced by THIRTY FIVE HUNDRED ($3,500.00) DOLLARS on an annual basis for each child, so that when both children reach the age of twenty-one years, or have died or have married before they reach the age of twenty-one years, or are no longer living under the care and supervision of the mother (e.g., if in the military forces) (and in the the event that the wife has not remarried), then the sole obligation of the husband will be to pay the wife the sum of FIVE THOUSAND DOLLARS ($5,000.00) annually, payable in equal monthly installments.
A rider attached to the agreement reads as follows:
This agreement shall be binding on the Estate of the husband to the extent of the payment of SEVEN THOUSAND ($7,000.00) DOLLARS for the benefit of the two children, as in this agreement provided for.
The agreement, dated March 28, 1958, consisted of eight numbered pages signed on page 8 by Theodore and Sara, followed by the rider on a separate page numbered 8-A, also signed by Theodore and Sara, followed in turn by an unnumbered page in which the signatures of Theodore and Sara on the ‘foregoing instrument’ were notarized. The signatures of both parties were thus notarized on March 28, 1958. The sheet containing the notarizations was in turn followed by two unnumbered sheets containing two exhibits. The eight numbered sheets, the rider on page 8-A, the notarization sheet, and the two exhibits were all bound together in the foregoing sequence.
In the income tax return filed by Theodore and Toby Gotthelf for the year 1960 they claimed a deduction of $12,000 for ‘alimony’ paid by Theodore to Sara during that year pursuant to the separation agreement. The Commissioner determined that the payments to Sara amounted to $11,400 and that $7,000 of this amount was for child support and was not deductible by Theodore and Toby Gotthelf under the provisions of sections 71 and 215. In their petition Theodore and Toby concede that the payments made to Sara in 1960 amounted to $11,400. They contend that this amount is deductible by them as alimony.
In the income tax return filed by Sara for the year 1960 she included $4,400 in her income as alimony received from Theodore. The Commissioner determined that the entire $11,400 received by her from Theodore during that year constituted alimony which was includable in her gross income. She contends that $7,000 of this amount was for child support and was, therefore, not includable in her gross income under the provisions of section 71(b).
We are satisfied that, in the absence of the rider on page 8-A, the $7,000 payment would not qualify as child support under section 71(b), in accordance with Commissioner v. Lester, 366 U.S. 299. Cf. Van Oss v. Commissioner, 377 F.2d 812 (C.A. 2). True, the plain implication of paragraph 5(a), (b), and (c) of the agreement is that such payment was intended as child support. Thus, $12,000 a year is to be paid annually to the wife for her support as...
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